This year has proven to be a turning point for the Galway housing market. After six years of falling prices, price inflation has re-emerged most notably in Galway city. The first nine months of 2013 saw the first period of positive annual price growth in the Galway housing market since 2006. Early indications suggest that the Galway city market has grown by more than 10 per cent during 2013. The strength of price growth in Galway city is fuelled by a shortage of supply.
According to the latest figures from the Department of the Environment, 6,507 housing completions were recorded for the first 10 months of 2013 in Ireland. This represents a five per cent decline when compared with the same period of 2012. Notably, Galway overall accounts for just 6.4 per cent of the total; a historically low level of activity.
With a dearth of new construction activity, the market is particularly focused on the quantity of stock that is actually for sale. The perfect storm of negative equity, tracker mortgages, and no bridging finance has negatively impacted the quantity of second hand properties available for sale in the country overall and notably so in Galway city.
As of July 2013, there were 3,173 residential units available for sale in Galway, but only 1.6 per cent of the private stock in Galway city is available for sale. Such figures suggest an emergence of a supply pinch point, which could further impact price performance in the short term.
An analysis of transaction activity reveals that the market remains largely dominated by owner occupiers at 61 per cent. Furthermore, investors bought 25 per cent of the properties transacted in the year to date. This represents a very significant uplift on previous years.
First time buyers remain a relatively active cohort in the market accounting for 11 per cent of the properties traded in the 11-month period.
Cash is a driving force in the market with latest available figures revealing that approximately 54 per cent of all residential transactions in the first nine months of the year were bought outright with cash alone. Cash purchasers include owner occupiers re-entering the market having sold their family homes some time ago, investors interested in achieving a strong yield, and non-residents interested in attaining some of the value in the Irish market.
Looking at overall activity in the Galway market, there was a notable increase in the quantity of transactions closed in the first 11 months of 2013 when compared to the comparable 11 month period of 2012. A total of 1,243 properties were transacted in the Galway region. In comparison 974 transactions were recorded in the comparable period of 2012; representing a 28 per cent increase in transaction levels for this period year on year.
So all in all it appears that the Galway market has turned a corner, and thankfully the years of falling prices appear to be behind the market. That said, it would be foolish to suggest that all locations will benefit equally. As in any recovery, one can expect the most sought after locations, like Barna, Salthill, Bushypark, and Taylor’s Hill, for large detached homes, and locations like Knocknacarra, Newcastle, Renmore, and Roscam will enjoy greater price growth than the average. Family homes are performing best, however there is also emerging evidence of price inflation in the apartment market in quality schemes in the better locations.
Looking to the year ahead it would seem that without any significant uplift in supply, that price inflation will remain a feature of the market in 2014. The potential for some further upward pressure is evident as consumers become frustrated by the lack of supply, leading to an increase in multiple bidding in sought after locations. The continuation of the CGT relief for 2014 should result in a strong investor appetite, which will positively impact the apartment market. In conclusion it seems that 2013 was a game changing year for the Galway market and we are looking forward to 2014 with growing confidence.
Head of Sherry FitzGerald Galway